City employee payments into pension system among the budget-trimming ideas floating around City Hall
This article first appeared in the St. Louis Beacon, Jan. 19, 2010 - Among the many budget dilemmas facing St. Louis City Hall -- where about $45 million needs to be reduced from the coming year's spending -- is one that already is plaguing other communities in Missouri and elsewhere:
How to handle the rising cost of government payments into pension plans for retired public employees.
St. Louis now requires no employee contributions for its pension system covering civilian employees. Firefighters and police officers contribute 8 percent and 7 percent of their pay, respectively. (City Hall has no control over the police pension system, because the department is controlled by the state.)
But one option that St. Louis Mayor Francis Slay's administration is floating would require employee contributions to the civilian-employee pension plan. According to the budget-cut idea list that his office is floating, employee contributions of 4 percent of their pay could save the city $10 million a year, and strengthen the stability of the system.
(A similar proposal was floated close to 40 years ago during the administration of then-Mayor John Poelker, a former city comptroller also concerned about rising pension costs. The idea was scuttled.)
Officials emphasize that this latest proposal would have no financial effect on current city retirees.
Introducing employee pension payments was the biggest-ticket option among those offered for discussion by Slay's staff.
Aides emphasize the options are simply that, and not outright proposals. (Comptroller Darlene Green and the Board of Aldermen also are expected to offer up their own budget-trimming lists.)
Still, the pension payment idea did come up last Friday in off-the-record discussions with some city aldermen, who noted that the city's contributions to its pension plans has quadrupled in less than 10 years.
It should be noted that St. Louis' pension systems are in better fiscal shape than some other Missouri communities, notably Springfield, Mo., where voters were asked last fall to hike their sales tax to pay for pension shortfalls.
But Slay underscored on his blog late Monday the significant role that the city's pension payments are playing in St. Louis' budget crunch.
As the mayor explained: "Like just about every other governmental jurisdiction, every household, every business, and every non-profit group, the city of St. Louis has less money because of the global recession. And because the employees, firefighter and police pension systems lost so much money when the stock market crashed, our pension costs are going up as well.
"That double whammy -– lower projected revenue and higher projected pension expenses -- will require the city to fill a budget gap of about $45 million in the next fiscal year, roughly 9 or 10 percent of the budget. That isn’t a catastrophe, but it is a challenge.
And it will require a stronger consensus than usual, because it will result in some things being less and different."
Even if the economy improves, Slay and his staff emphasize that so much pension money was lost during the stock market downturn that a sizable chunk can't be recovered.
Pension headaches also are plaguing the financially strapped states of Missouri and Illinois, which also have seen their pension payments shoot up because of the stock market losses. Illinois Gov. Pat Quinn already has floated the idea of offering lesser pensions and benefits for future retirees.
By the way, the University of Missouri system recently began requiring its employees to contribute to their pension fund.